This is premature. Much of the FT coverage has highlighted moves to end legislated rents enjoyed by groups like lawyers, notaries, geometras, and pharmacists. In reality, the biggest of these rents have been abolished already, while long-run economic weakness has forced professionals to give up many of their remaining minimum charges. Notaries could be squeezed further, but their last really juicy rent — the requirement to use a notary every time you buy or sell a car –went years ago. Lawyers and geometras were long since forced by the weight of their numbers and the weakness of the economy to either dispense with official fee schedules altogether or to operate at the bottom end of them. There is such a ridiculous number of lawyers, accountants and geometras in Italy that they have to bid each other down. The nominal level of professional fees in Italy is not the real problem.

What has destroyed the Italian economy is transaction costs — the nominal fee plus the time-and-aggravation cost of getting anything done. The Euro7,000 charge for our leaking roof case would have been unreasonable but for the fact the case took seven years for the magistrate NOT to reach a decision. Italy requires systemic change to create institutions that allow the economy to be more efficient.

The biggest necessary change is a functioning legal system. Monti has offered nothing on this front, save plans for a special business court to try to encourage foreign direct investment. This is a remarkably third-worldy as a policy proposal. It is reminiscent of when a country like China sets up a ‘one-stop’ investment office for multinational companies or agrees to abide by international arbitration decisions in business cases. That kind of thing works for emerging economies if they have high growth rates, which are what attract investors. Italy has no growth. If any investors are to become active in the Italian market, foreign or domestic, they require a legal system that works. Mario should get on and propose one.

Like this:

It turns out to be necessary to do one more week in Cambridge, wandering the towers of the gargantuan University Library and photocopying a 10-centimetre wedge of research material, which I now know is close to the maximum that my back-pack can carry; it has to be over a thousand pages, though I don’t want to think about this because I have to read them.

The week gets off to a good start with breakfast with Tim Clissold, author of the excellent Mr China, the stranger-than-fiction tale of investing several hundred million dollars in China in the mid-1990s. Tim trained as an accountant, then learned Chinese, then teamed up with a high-flying American investment banker who had raised (what was) the single biggest fund for buying businesses in the Middle Kingdom. I wrote about this in The China Dream, but Tim’s warts-and-all inside story turned out to be perhaps the best insider tale of China business that has yet been written. And in the meantime, he drew a good salary, invested wisely, went on to do a stint of investment banking with Goldman Sachs, and then launched his own entrepreneurial investment career buying and turning around small-ish industrial businesses. I live and learn.

For me, the remarkable thing about Tim is his ability to see the most outrageous, grasping, brazen scams as intellectual curiosities. In his first career in China he was threatened, kidnapped and daily deceived. His response was that of an astute provincial accountant confronted by a loutish child on a bus: faint bemusement and a simple determination to deal with the situtation, with or without the conductor’s help. He is very good at seeing the other person’s point of view; but also rather principled.

Tim’s latest adventure is carbon trading in China; he maintains an office of about 20 people. It is, he says, at least as scurrilous as anything he has dealt with before and more than likely the basis of a new book. Pay-offs, forged signatures, phantom projects — all are par for the course in securing cash for supposed pollution reduction under the UN-sponsored global carbon trading scheme. The evening before we meet he had dinner with one of the top executives at China’s largest thermal power firm whose (almost certainly) forged signature, Tim gleefully observes, has been attached to a deal he is currently reviewing.

The Clissolds have moved back to the UK from China, although Tim still spends much of his time there. In his own moment of weakness, he bought a large pile in Richmond in North Yorkshire, only to find it infested with rats apparently immune to all known poisons. The family moved out and were surprised to find another family of expats from the East willing to buy the rodent colony. The Clissolds have reined in their delusions of grandeur and now lead a more modest life amid the bizarre sociology of North Yorkshire: inbred RangeRover driving eejits on the one hand, a thankless rural proletariat on the other, nothing in the middle. Tim takes modest comfort from his local status as the stand-out eccentric. He paces the town with a dog called xiong xiong which, having been brought back from Beijing, responds only to commands in Chinese. The scene he describes when barking commands at this dog in a local shop or pubs is what you would expect.

Clissold tips me off to interesting goings on in the world of ultra super critical boiler technology and, thus enthused, I read three of the best PhD theses my supervisor has seen (trying to figure out what I am supposed to be doing) and copy the aforementioned chunk of clever scribblings. When I take the early Friday flight back to Perugia after four days full on in Cambridge, it is one of the rare times going back to Italy that I am not quite sure what the point is: for a moment, England (and abroad) seems terribly serious and interesting and grown-up by comparison. I supposed this is the conclusion that thousands of Italians who are now leaving to work overseas have reached.

Landing in Perugia, I am exhausted. This is the problem with doing four 12-hour days; I cannot be productive for a fifth. Also, it seems, I am on the wrong side of the plane. Instead of one of the most beautiful airports in the world, I see only the capannone — the concrete industrial blocks — of the Tiber valley. What, as one Italian friend asks, is going on with all these new structures in an economy that is currently shrinking more than the UK’s and at the best of times barely grows?

I decide to drive up to Moravola, which as I said before is the best restoration project I have seen in Italy, and get in the way of Seonaid and Chris. They are working like lunatics, trying to run their boutique hotel themselves while guest numbers build up. This appears to involve a 5am to midnight shift, seven days a week, but they remain in good humour. We chat in the kitchen and are soon joined by a charming, designer Swiss couple. These are the kind of clients you want at this stage: relaxed, appreciative of the extraordinary quality of the project and unworried by somewhat slow service as Moravola builds up its business and hence its staff. We set about a bottle of white and talk about Europe, Italians and children. Looking at the surroundings and at Moravola, the Swiss wistfully conjecture how nice it would be if they had a place in the Umbrian sun themselves. Of course they don’t know how much work was involved and how unbelievably expensive the project would have been if Chris, a trained Norman Foster architect, hadn’t become a builder, fabricator and carpenter and done much of the construction work himself. After six or more years he has even acquired a sort of idealised builder physique. Not that the wife is complaining.

Seonaid, on a topic close to my own heart, causes much mirth by relating a recent exchange with a Danish architect who is using Leo Petturiti as his geometra for a client project in the Niccone valley. According to the Dane, the clients are not entirely convinced that Leo ‘gets’ their project vision. So the Dane gamely suggested to Seonaid that he bring the scrofulous one up to Moravola to give him a few ideas about quality restoration work. Large mistake. Unknown to this Scandinavian, Seonaid has already had her fill of Little Leo. When she and Chris first came to Italy to look for a property they wanted to buy a ruin on the west side of the Tiber that was being handled by Petturiti and James Stephens. They agreed a price, signed a contract, and made the compromesso downpayment. Deal done. Driving back to the UK, however, they got call from Stephens’ office to say they couldn’t actually have the property unless they paid a lot more money. Petturiti and Fat Boy had gotten a better offer. To cut a long story short, the illegality of what the agents did was so cut and dried that under threat of legal action Seonaid and Chris were eventually compensated. But it tells you plenty about the way certain people do business. And so when the Dane mentioned bringing Leo up, the response from Seonaid was that Leo will not set foot on her property so long as she breathes.

To the lawyer’s office for a post mortem on the case against James Stephens, Leonardo Petturiti and the building firm now calling itself Lacos. Laura, the lawyer, tots up the numbers. We first issued lawyers letters in the hope of getting our roof fixed without the need for a case in 2001, after non-lawyerly pleading had been ignored. A case was initiated in 2002 and accepted by the court in October 2002. It effectively ended in June 2009, with a settlement but no judicial decision, though there will be a final hearing to celebrate the archivazione of the case on 7 July.

It total, there will have been 15 hearings over eight years of pre-trial and trial activity. However three of these are from recent weeks under the dashing Dr. Cenci (who, having resolved almost all of Citta di Castello’s outstanding legal issues in less than a year of tenure, is to move on this summer). If one subtracts the Cenci hearings and the period before the first hearing, then the core case averaged one ‘audience’ every seven months for something over six years. A good rule for a hearing, I think, is two hours of standing around followed by something over an hour of achieving not much, followed by lunch.

With respect to our standing at the end of the case, the numbers give the following reckoning:

Incoming

Fat Boy pays us: Euro3,000

Petturiti pays us: Euro3,000

LAME/LACOS pays us: Euro3,000

Total Euro9,000

Outgoing

Lawyer, court fees, etc Euro4,500

Initial survey by new geometra

to substantiate our case Euro1,000

Court-mandated roof survey by

geometra who won’t go on roof * Euro2,300

Total Euro7,800

*(The submission of this survey took 18 months, or three times the stipulated norm.)

So the difference is Euro1,200. That covers some of the cost of the materials required to fix the roof (including a replacement terrace flooring). But the majority of the expense on external repairs was in the form of labour. After Petturiti and the building firm had come back for a joke, one-day intervention in 2001, when they threw down some sealant borrowed from another site, I was so concerned with being ripped off again (and I think at the time also broke) that I worked myself as the labourer/operaio for a retired builder from Pietralunga in order to sort out the roof; it was he who taught me something about building and with whom I have enjoyed working ever since. In some places we laid new roofing felt and in others we variously used sealant and added a new line of tiles to cover a water run-off where felt had not been laid properly. It was not at every leaking point a perfect solution, but we worked carefully, and the roof has not leaked since. Frankly, once a roof has been screwed up, it is a difficult thing to remedy completely, which is why in many places (including northern Italy) roofing is a specialist job. In all, including the refinishing of a terrace, it probably took the two of us two weeks each.

In addition to this, the single biggest expense would be (if we had done them) repairs to internal damage – including discoloured oak steps on the staircase, which were damaged by leaking water before they were sealed, and streaks, stains and mould on painted walls. The latter is the most problematic because in our house, as in successive apartments we have had in Citta di Castello, we used a time-consuming and expensive painting technique involving a base of white calce, layers of calce-based natural colour, and a finishing layer of wax mixed with natural oils. The aesthetic possibilities of this technique are considerable, and the wax finish makes the walls cleanable, but if you get water coming in behind the surface, the wax means it has nowhere to go, hence mould. Given the cost, and the reality of three small kids in the house, we have redecorated only the room that was worst affected.

So what were the lessons from the case? The first, I think, is that if you have a problem with building work, take lots and lots of photographs of physical evidence yourself. I foolishly left most of this to the geometras who came to survey the damage. When I was covering one part of the roof in plastic to stop water coming in, and particularly while we were repairing different parts of the roof, there were ample opportunities to take more photographs to show exactly how roofing felt had been mis-applied. With the benefit of hindsight, it seems very silly not to have done this. I think that once we began to fix the roof I was just so relieved that something was being done that I lost my focus on the case. (I am not certain that photos taken while we did the repairs, when the case was already running, would be admissible; but they should still have been taken.) I also thought that another builder, who was then running his own firm, and who came up and saw (indeed explained) much of what had been done wrong, would provide clear testimony in the case.

That was lesson number two. Never expect a builder to provide testimony against another builder, never expect a geometra to provide clear testimony against another geometra. Lesson three is the biggest one of all. Don’t ever pay for anything until you are absolutely sure that you are getting what you are supposed to be getting. In many respects, deferred payment is the local solution to the absence of a functioning civil court system. Foreigners tend to hang themselves because they want to settle their accounts promptly. It would be better to take on board the local saying that: ‘For paying and for dying, there is always time.’ I, I’m afraid, fell into James Stephens’ trap of signing a delega to give him access to our Italian bank account. So by the time we actually came to live in Italy, and discovered our roof leaked, the builders, Petturiti and Fat Boy had long since taken their money and run.

Was the case worth it? In the sense that we could not get a decision, and the settlement barely covers the costs, clearly not. It is really the first of these things that is most depressing. When I started the case, and lots of people said it was a waste of time, my argument was that the justice system is slow, but in the end it functions (perhaps I meant that in the end surely it must function, ho, ho). I told friends that slow justice is not necessarily a bad thing if it discourages the kind of ambulance chasing you get in Anglo-Saxon societies. But in this case the justice system did not function at all. It was pretty unpleasant to see the studied inefficiency of the system at work. How magistrates arrived at a place where they do an hour’s work on a case every seven months I cannot imagine. It is as if management consultants had been called in and told the objective of the system is to achieve nothing.

I spent a lot of time during the case, especially when I had to go to the tribunale, thinking about how much decent people must be suffering because of this system. There is in fact some reasonably hard evidence that this is the case. Contrary to popular opinion, Italians score close to the bottom of the list in European surveys about happiness and satisfaction with their lives. What is particularly interesting is that when researchers attempt to figure out why this is – most often using questionnaires structured by psychologists – the clearest pattern that emerges is that there is some broad link between the level of trust in institutions in a society and aggregate levels of happiness. The latest iteration of a European survey project run by Cambridge University, published in April, had Italy right down at the bottom of the happiness table, the UK somewhere in the middle, and Scandinavian countries up at the top. One of those running the project remarks:

‘The survey shows that trust in society is very important. The countries that scored highest for happiness also reported the highest levels of trust in their governments, laws and each other…

Many of the happiest countries in the survey – the Scandinavian members, Luxembourg and the Netherlands – also come top of the World Bank Governance Indicators, which seek to assess the quality of a country’s government. Likewise those EU 15 countries that scored worst in terms of governance (Italy, Portugal and Greece) tended to come bottom in the happiness survey as well.’

Happiness surveys are notoriously difficult to do well, and one should not place too much credence in a single project. But for me, the findings are in line with arguments that have been made by people like Amartya Sen, and which I have come to find quite convincing. I used to think that important institutions – like a functioning legal system – were essential to economic development and hence, by logical extension, a developed country like Italy must have a functioning legal system (just a slow one). This line of argument is associated with some of the economists who practise what is known as New Institutional Economics, which has become quite fashionable in the past 10 years or so. However, after spending a decade in China, and almost a decade in Italy, I no longer believe in this reasoning. I think economic development can occur despite a highly inefficient legal system; indeed I think there are cases in China where the weakness of legal institutions has even (temporarily) contributed to economic growth by allowing narrow economic interests to trump social considerations. So instead of the ‘precondition of development’ argument about institutions, I now prefer an extension of Sen’s one about democracy. Sen has long argued that the debate about whether democracy is necessary to development is a sterile one, based on a false distinction. Democracy, he says, is a part of development, and so it is pointless debating whether it is also a condition for it. I suspect the same thing is true of some other institutions, including a civil legal system. A legal system in which people can trust makes for a more contented society; all societies seek to develop in the direction of greater contentment; what Italy confronts is in essence a developmental problem.

Anyhow, that seems to have taken us quite a long way from James Stephens and Leo Petturiti, but perhaps someone will follow my drift.

Housekeeping. I hope there will not be too many of these… A comment has been submitted which I am not going to post. The sender: Emilia Maccioni (the wife of Leonardo Petturiti). Reasons for not posting: 1. absence of any substantive content. 2. remarks likely to cause offence to anybody who has suffered, or who has friends or family who have suffered, from any form of mental illness. I don’t mind what people say about me, but general bigotry is off-limits.

Like this:

My premonitions about Dr. Cenci’s determination to reduce the number of outstanding court cases in Citta di Castello prove to be somewhat accurate. On the morning of May 19, 2009, our case against James Fat Boy Stephens, his geometra Leonardo Petturiti, and the building firm once known as LAME (boy does that look like a warning in hindsight, even though it means ‘blades’ in Italian) ends, not with a bang, but with a whimper.

It is at least fitting that Giorgio Merli, the frequently drunken builder who was probably most responsible for leaving gaps on our roof where water-proof roofing felt would more normally be applied, is present on the part of the now-defunct LAME (reborn as LACOS, in case they are on your roof as you read). On the other hand Giorgio is perhaps just one of life’s sad people; it is his brother who is studiously unpleasant and who perjured himself unashamedly in court. To Giorgio’s left is Fat Boy and to Fat Boy’s left is his bouffant court jester, little Leo Petturiti.

Cenci begins the way he means to continue: ‘Is it possible for the parties to arrive at an agreement? This case has been going on for nine years.’ He says this as if it is the fault of an organisation other than the one he works for.

Fat Boy’s Perugia lawyer offers Euro7,000. This is against an estimate (based on standardised, state-approved costs) of something over Euro13,000 that was calculated for the cost of repairs (most of them now done) to the roof. I say no, for two reasons. The first is that the Italian legal system being what it is we only brought one case against Fat Boy, when in fact we were unhappy about all sorts of things that happened at our house before we sacked him. This leads to the second, key reason, that what I really want is a decision by the court that says that what these people have done is wrong, legally wrong, and that ultimately we have a judicial system that establishes that. The defendants haven’t been conciliatory for the past eight years, they didn’t give a toss when the roof leaked in 12 places and my wife was pregnant (Petturiti finds this remarkably funny), they have sought at every turn to prolong the case, and it is not really a question of money, it is a question of principle and of being able to say that dishonesty does catch up with you.

Unfortunately, Dr. Cenci and I don’t seem to be on quite the same wavelength. His overriding concern appears to me to be to get the case closed — at least I don’t like the faces he makes when I suggest the court moves to a ruling, which would involve reading all the files (it is quite clear he has not read anything so far). Fat Boy’s Perugia lawyer ups the offer a bit, Cenci talks about the case going on for many more years, my lawyer points out that if Cenci allows the other side to send the court-appointed geometra to our house a third time — as has been requested — it will likely be two more years before we get even an initial decision which, of course, they can then appeal.

Numbers are discussed in the background. I am fairly sure that at one point Fat Boy offered more than I actually accepted. I am not really concentrating. I am thinking that I can’t face more of this when we now have estate ageent Davide Leonardi of Leonardi SRL to deal with (more anon). After nine years I have all the evidence I need that the local court system is everything that caricature books about Italy indicate. I have what I need for anecdotal purposes and it is time to start doing something useful. For nine years I respected the court, waited for it to do its job, and did not publicise what Fat Boy and his crew get up to. The few preparatory entries on this blog have not been publicised and they have not, according to the blog software, been viewed. Now that can change.

I accept Euro9,000 and ask Cenci a question: ‘Why is it that with a system like this there isn’t more crime in Italy? Why doesn’t every thief in Europe come here?’ It is a cheap parting shot, but it is also a reasonably serious question. Luckily for Italy, the predictions of mathematised models beloved of contemporary social science rarely stand up to empirical tests — if it were the case, this place would truly be an anarchic hell.

Finally, the farcical addendum. There is, of course, inevitably, a farcical addendum. After we leave, our lawyer recommends that we apply for state compensation that exists for people whose legal cases exceed the current duration ‘norm’ (around three or four years). My immediate response is that there is no way that I am taking taxpayers’ money to compensate me for the incompetence and inefficiency of the state. The lawyer’s argument, however, is that this is one’s only available form of legal protest against a system that does not work. We discuss, and eventually agree to go ahead, on the basis that if we get the money we will not keep it. The compensation is around Euro1,500 for every ‘excessive’ year in court. If you would like to recommend a deserving local charity, please do so…

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Baseline Scenario
About the US economy, mostly. These boys are not too funny (they are economists) but they put in serious hours on this site and it is worth reading. Johnson is a Brit former IMF economist with perspective. Updated daily.

John Kay
About Britain and micro-economic issues. Research-heavy analysis rather than opinion. One of the few people with really clear ideas on bank regulation, but not yet (for me) fully thought through.

Krugman
Posts multiple times a day cos he’s manic. I was at a boring conference with him where he appeared to take frantic notes. Later transpired all he had written on his pad was ‘I need a beer’, about one hundred times. Still got Nobel.

Martin Wolf (FT sub needed)
Particularly good on Europe. During his life, Wolf has fallen in love with — and then become disillusioned by — the Labour Party, the World Bank, and perhaps now globalisation. The constant is his hunger for answers.

The Big Lychee
About Hong Kong. Affiliated with Hemlock, the exquisitely misanthropic, underemployed, billionaire’s gweilo running dog. Original Hemlock files available. Updated every day, because the author has a huge salary and nothing better to do.